by Lewis Schiff
You will likely experience this transformation in ways that you would least expect. That’s because the 17 Essentials constitute a complete, synergistic system for becoming Business Brilliant yourself. As you may recall from chapter 1, synergy by its very nature produces results that are unexpected and novel—results that may shock and amaze you.
I’ve done my best to design these techniques so they are straightforward, easy to understand, and, above all, mundane. Remember, mundane is good. As we saw most vividly in chapter 1, Allegheny General Hospital all but eradicated infections in its intensive-care units by demanding that all medical personnel faithfully adhere to the most mundane procedures and protocols. Mastering the mundane saved dozens of lives each year at Allegheny General, lives that had been lost in previous years despite its highly trained and well-educated staff and all their world-class medical technology.
One of Lemov’s 49 techniques is something he calls Tight Transitions. A major source of disruption and wasted time in grade school classrooms is the simple act of passing out and handing in papers, which happens about 20 times a day and consumes one or two minutes each time. Lemov shows a video of a Connecticut teacher who has taught his students how to pass out papers through the entire classroom in 8 to 10 seconds. Executing that simple procedure so quickly ensures that the class is not distracted, while the teacher recovers a total of 30 minutes of instruction time every day. Thanks to the way they handle papers, the children in that classroom will benefit over the course of the year from about eight more days of instruction than the children in the next classroom, which is one reason why the Connecticut teacher’s students outperform on their standardized tests. Time and focus—the two most precious commodities in any kind of mental work—are preserved by mastering this most mundane of tasks.
Thousands of students graduate with degrees in teaching every year and not one of them has gotten instruction in how to pass out papers. For all their value, techniques such as these are beneath the notice of the educational establishment. In a similar way, you won’t find these 17 Essentials included in any college or graduate school course on business or entrepreneurship. They’re too mundane. But they’re also extremely valuable, because they are designed to protect your precious time and focus.
If you want to go deeper into any of these 17 Essentials, I’ve provided a bibliography of resources in the back of the book. But don’t get bogged down in the paralysis of analysis before you begin. It’s best to start out with the simple and mundane. The reason can be found in Essential 16: Don’t Procrastinate. Most of our middle-class survey respondents struggle with procrastination, a problem shared by very few of the self-made millionaires. It’s important to dive in and get moving. That’s the true meaning of Persistence. And if you can’t get moving, get help (Essential 12: Get a coach). That’s what Assistance is all about.
If you need a short action list to set you on your way, just try and make sure you’re always doing at least one of the following every day:
Learning what you do best.
Earning some dollars at it.
Getting Assistance with what you don’t do best.
Using Persistence to overcome self-doubt.
Learning. Earning. Assistance. Persistence. LEAP. The sooner you put them into action, the sooner you’ll be doing more than just following the money, you’ll be LEAPing into it.
Learning
Becoming Business Brilliant first requires learning—learning about yourself, your goals, and the best ways of reaching them.
ESSENTIAL 1: WRITE DOWN YOUR GOALS
Having a long-term goal, expressed in monetary terms, gives you a point of focus for all your efforts toward Business Brilliance. Dollar goals are valuable because they are easy to measure, and what can be measured can be managed. Goals make becoming Business Brilliant a manageable task.
Ideally, all your daily priorities should be informed by the amount of wealth you’d like to achieve 10 years from now. If you set a goal of having a net worth of $10 million or more in 10 years, you probably need to aim for an equity share in one or more salable businesses. Your choices of prospects, partners, and projects need to be defined by that objective, driven by your 10-year goal. What kind of businesses? Save that for later. The goal is what matters. It gives you the decision-making power to respond to those and all the other questions you’ll face down the road.
Once you’ve chosen a 10-year goal, you’ll need incremental goals to guide you on the way. Let’s say your 10-year goal is to have $2 million in investable assets. How much money would you have to have over each of the next five years to position you for reaching that goal? How much would you need to make per month in the coming year? If you are a professional who charges by the hour, what does your target hourly rate need to be?
Incremental goals clarify and simplify what you need to do. Hitting them helps preserve your sense of purpose and forward progress. But sometimes these incremental goals do the most good when you fall short of them. Failing on your monthly income targets will expose your need to make some adjustments more quickly. On the other hand, it’s just as likely that you’ll reach some of the short-term goals faster than you thought possible. Then you might need a new long-term goal, because your capabilities are greater than you had thought.
THE TECHNIQUE: Take 20 minutes. Choose a goal for your net worth and write it down as Year 10 on the right-hand side of a sheet of paper. Then, moving from right to left, write down your average monthly income goals for Year 5, 4, 3, and 2. Finally, write down your monthly income goals for each month of the coming year, starting with next month. Post the sheet in a place where you can see it every day from your desk. Repeat this process every time you complete a deal or have a windfall.
ESSENTIAL 2: COMMIT TO WHAT YOU DO BEST
Focusing your energies on what you do best is the path taken by the world’s most extraordinarily successful people—everyone from Bill Gates to the Beatles. It’s the path taken by ordinary successful people, too, like the millions of self-made millionaires out there. Through trial and error, most of them have found the handful of things they do best, cut back on distractions and diversions, and executed on their special talents in ways that allowed them to hone their Business Brilliance.
This idea goes by a lot of names—identifying your strengths, discovering your core competencies, or distinguishing your special abilities. I like to call it “finding your Center” or just plain “Centering” because it’s a visual term that’s easy to remember.
Most people aren’t Centered at all. Polling by Gallup shows that only 1 out of 3 employees is able to say that “at work, I have the opportunity to do what I do best every day.” This is a big reason why average wages for college-educated workers have barely grown in the past 15 years. They have no leverage to bid up the price of their labor since they are only adequately suited for the work they do. If you’re not engaged with what you do best every day, you’re poorly positioned to become Business Brilliant. And in an age when millions of routinized white-collar jobs are being sent overseas, Centering might be your most vital economic survival skill.
Centering should be something that is central to your daily life. One of the best things about it is that it lends value and meaning to even your worst setbacks and disappointments. When you work at what you do best, even a crushing defeat can be an important source of self-knowledge and progress toward your Center. Most self-made millionaires say they count on setbacks to help them redefine what they do exceptionally well. They use trial and error to get more Centered. That way, even when their best efforts go unrewarded, they are still refining their expertise.
THE TECHNIQUE: Take 10 minutes. Write down as many examples as you can of tasks you believe you do exceptionally well. Try to choose skills and capabilities you think you could convincingly explain to a stranger who has some knowledge of your field of expertise. Repeat the process for 10 minutes the next day. Then start editing the list until you only have three items. Next to
each of these three items, write down three clear statements that provide evidence these items are true.
ESSENTIAL 3: FOLLOW THE MONEY
Look at the top people in any field and you will see who has gotten there by following the money in that field. They are working at their Centers and sharing in the rewards that come from creating things of great value for others.
The chefs who fall into money run restaurant partnerships, write cookbooks, and star in their own cable shows. The carpenters who fall into money own their workshops, do high-end custom work or partner in real estate–development deals. Top managers in the corporate world either earn bonuses for producing strong financial results or gain equity stakes in their companies.
All of these people are positioned in “the Line of Money.” Whenever they help create value and money changes hands, they are in line to collect a share of the rewards. Business Brilliance only happens to people who put themselves in the Line of Money first.
The greatest rewards in any profession or occupation are reserved for whoever is most Centered and most directly in the Line of Money. I’ve studied this in the medical profession. On average, doctors are the most highly paid professionals in our economy. But the doctors who rank in the top 10 percent of income among doctors are not necessarily the smartest, the most proficient, or even the most popular doctors. The wealthiest doctors are those who first chose the specialty that best suits their skills very well and then took an ownership stake in a practice that specializes in that type of medicine. They are Centered and in the Line of Money.
The same goes for lawyers, engineers, and even academics. The charter school movement has allowed large numbers of educators to start working for shared rewards instead of salaried compensation. If you consider the proliferation of Bible Belt megachurches, you will see that even some clergy-people are Centered and in the Line of Money.
Following the money generally means your main source of income comes from being in the Line of Money. It’s not necessary to quit your job if you want to get into the Line of Money, but our surveys tell us that only 1 in 10 self-made millionaires became wealthy by working for someone else. Most of them worked at salaried jobs where they honed their skills and found their Centers, and then transitioned into self-employment or a partnership.
THE TECHNIQUE: Take 20 minutes. Go over your list of three things you do extremely well from the Centering exercise and write down the occupations that, to your knowledge, most often use those skills to make the most money. This might seem a pedestrian exercise, but it’s not. With a little bit of thought, you should have two or three things you’ve never considered before.
ESSENTIAL 4: CLIMB THE LINE-OF-MONEY LADDER
Wherever you find your Center, you should be able to see countless ways to use it to get in the Line of Money. Some of these ways are more rewarding than others, though, so it’s important to sort them all out. When you can picture all the different ways you might follow the money, then you’re ready to take a harder look at the Line of Money as though it were a ladder. Each rung on the Line of Money Ladder is defined by the type of price you put on your participation. Each step up yields higher rewards, with equity at the very top.
PREMIUM PRICING is the bottom rung on the Line of Money Ladder. It is occupied by self-employed consultants and other independent contractors who price their efforts at hourly rates. Because time is finite, this is the most difficult way toward Business Brilliance, although top-tier trainers, tutors, psychoanalysts, and other personal-service professionals are good examples. They demonstrate their own brand of Business Brilliance by cultivating such high demand for their time that they bid up their hourly rates.
PROJECT PRICING is the next rung up the ladder. When you work on a project basis, you enjoy the advantage of being rewarded for achieving a result, regardless of your time commitment. Your brilliance comes by charging as much as you can, and then handing off portions of the work to other professionals to get the job done more quickly.
PERCENTAGE PRICING is another rung higher, because a percentage means you’re getting a discrete cut of the rewards for success. This is commonly the lucrative add-on in an agreement to project pricing. Many deals closed with project pricing have a component of percentage pricing worked in, offering additional shared rewards for delivering on a winning effort.
PROPRIETOR PRICING is another name for equity participation. It’s the top rung in the Line of Money Ladder. When you’re in the proprietor role of a business, you’re not just playing in the game—you also own the team. Each successful project and each profitable quarter builds more value into the business you own either fully or in partnership. Most of the personal wealth in the world has been gained through equity. It is the highest achievement in Business Brilliance and it should be the ultimate objective in your negotiations. You want an ownership stake, even if it’s just a small share, of anything that might be destined to be sold later at many multiples of its current value.
THE TECHNIQUE: Take 30 minutes. Draw a four-rung ladder on a sheet of paper, with “Proprietor” at the top, then “Percentage,” ”Project,” and “Premium” on the next three rungs. Leave about five lines of empty space under each heading. When you’re done, you’ll have ideas for 12 projects, arrayed from lowest value to highest value, each one building on those below it. You’ve mapped your path for Business Brilliance. Redo it every time you land a new project.
Earning
Once you’re ready to take on a specific project, your focus needs to shift from learning to earning. Earning is how ideas turn into opportunities.
ESSENTIAL 5: RUN THE NUMBERS
There are five critical dimensions to every prospective project, regardless of size. Each dimension requires a good hard look before you spend too much time or money on the project:
1. WHAT WILL IT COST TO PLAY? What will you have to spend in order to get started? Add up everything you need to buy, all the services you need to employ, and all the work you and your partners will probably need to put in before you earn your first dollar.
2. WHAT WILL IT COST TO STAY? How much will it cost to operate your project once it’s running? Add up all the anticipated monthly bills and labor costs. Add the dollar value of your hours, too.
3. HOW HIGH IS THE CEILING? Estimate the potential income. This is a reasonable high-end number of dollars the project would generate if everything ran perfectly. Most projects face certain capacity limits and you need to know what they are. A restaurant’s revenue, for instance, is limited mainly by its entrée prices and the number of tables.
4. HOW HARD IS THE FLOOR? What’s the worst possible result? You will earn some revenue. But what is the absolute lowest monthly revenue your project will likely earn? How hard will it be for you to take a total loss? Prepare for the worst, and see what it might look like.
5. HOW BIG IS THE CHERRY ON TOP? If you’re working at your Center, every project offers some “soft rewards” that will benefit you in the long run even if the project itself isn’t a ringing success. List those benefits: a respectable track record, a set of new connections, a higher public profile, and so on. But a pro forma requires a dollar estimate. It turns out it’s easy to attach a dollar value to the Cherry on Top. If someone were willing to buy out your share of the project before it even starts, what is the lowest dollar amount you would accept to walk away? That, minus any cash you put into the project, is the exact value of the Cherry on Top.
The first job of the pro forma is to keep you out of trouble. It gives you the chance to stare at all the most important numbers and rethink the project or abandon it altogether. The rock-bottom expense of playing and staying might come too close to your ceiling on earnings. You need to ask yourself why you’d go into something with such a limited upside potential. Maybe the Cherry on Top is the answer. Maybe not.
Play. Stay. Ceiling. Floor. Cherry on Top. Whether you plan on flipping burgers or flipping real estate, these five numbers will help you determine the look and shape of wh
at you want to do, and whether it’s worth trying.
THE TECHNIQUE: Take 30 minutes to draw up a pro forma. Leave lots of room for what you don’t know and what you still need to find out. The numbers you use will always be gross approximations, but the exercise will force you to come to grips with what it will take to succeed.
ESSENTIAL 6: PROTECT YOUR BOTTOM LINE
Once you’ve run the numbers and decided to go forward, the pro forma should have helped you arrive at your bottom line. Not the project’s bottom line. Your own personal bottom line. This is the minimum reward—and maximum risk—you must have in order to participate. Until you decide on these numbers, you’re not ready to negotiate a deal with anyone.
If you put too high a premium on achieving a win-win solution, it might very well end up win-lose, with you holding the bag. Remember the Stephen Covey story about the landlord who was locked into a bad long-term lease because he felt he needed to close a “win-win” deal with a tenant? If the landlord had entered those negotiations with a clear idea of his personal bottom line, he would have known exactly when the tenant was asking too much. He could have walked away with a clear conscience.
I’ve shown how self-made millionaires are much better than most people when it comes to walking away from a deal that isn’t quite right. For some this ability may reflect their sizable egos, but that’s not the whole story. People who appear most comfortable putting their personal interests first are actually just executing on a predetermined plan. They come to the table knowing in advance exactly what they must have. It’s not about ego. It’s about respecting your own goals.
Linda Babcock in her college negotiating courses advocates the same approach to salary offers. You must draw a line below which you won’t compromise. It’s an essential part of negotiating, but most people never do it.